Tuesday, 29 July 2014

Mind Your Own Business! - Valerie Laws Helps Us Out - Again.

On the 29th, we try to post a 'How To' blog - but it's hot, and all the electrics are off sunning themselves.

So, since many of us are gearing up to the dreaded tax-filing ordeal, here's 'another chance to see' this How-To post from Valerie.

Why writers don't see themselves as businesses? No bird-feeding or kite-flying.

Following on from Catherine Czerkawska’s excellent post
the other day, asking why creative writing courses don’t prepare
would-be writers for the business side of writing and promoting, I’m
going to come out now right here in front of you all.
I am a business.
There, I’ve said it. Many of you are
already businesses, but perhaps you don’t know it yet. Perhaps you are
in denial. You don’t want to photocopy your bum at office parties or
wear boring suits or behave like Mr Banks in 'Mary Poppins'. Or as a
writer, you work mostly alone, and think of yourself as an individual, a
maverick, a wild card, a free spirit, and anyway your office parties
would be embarrassingly sparse.

Not that businesslike, really.

But think about it, if you get royalties
(sometimes, and often not much, but still...) from book sales, fees for
performances or talks or play commissions or other writery things. If
this is the case, you may be a business, and there are benefits out
there in the form of paying less tax (yay!) and having less bother
(woohoo!) which you might as well have, whether you’re struggling to
afford a new ink cartridge or deciding on which model Audi to buy. Yes, despite my unbusinesslike
demeanour, I’m self-employed which makes me a business called ‘Valerie
Laws’, and I’m also a ‘sole trader’ which sounds more romantic and a bit
piratey. I’m sure you’d like to be that (paging Julia Jones!)

Wouldn't mind photocopying HIS bum..

How can you tell if you are
self-employed? First of all, you say you are. You don’t have to get a
t-shirt printed or owt. Then you become ‘self-assessed’ for your taxes
(even if you are also employed a bit as well by someone else) and
hopefully you pay some NI contributions at the fairly low rate of the
self-employed. The self-assessed bit is important as it’s how you prove
you’re a business to tax people and Amazon. It cuts no ice with them
that you want to be alone like Greta Garbo, a creative soul in a garret
forgetting to buy cornflakes. You can do all that in your spare time.

I said you DON'T need a t-shirt!

Why is it worth dipping your tootsies in
the vile river of commerce?
Now for another confession. For years, I was a complete fool. An idiot.
Yes, me, with my first class maths degree. I filled in my own tax
return, shaking in my shoes, terrified of making a mistake, so stressed
out that I just declared my income as a writer, made a cup of tea, and
collapsed sobbing in front of the TV. I ignored the bit about business
expenses as I just couldn’t cope with that as well.

As a result, for years when I was,
surprisingly, making a living as a writer, I paid far more tax than I
should have, from a not very big income. You see? Stupid. I’d heard you
could claim things like heating your study and the like, but it all
seemed a bit scary and complicated. Then I found an accountant, through a
writer friend.There are some who specialise in writers and artists, and
know what we are entitled to claim as business expenses, some of which
may surprise you. You can do your own tax return without one, having
learned all about the exact details of how much of each category you can
claim for, but it may be worth paying (perhaps about £350 per year)
for an accountant to do it.If you are a professional writer (‘sole
trader’ remember) you can claim as business expenses all or part of such
things as: phone/internet/mobile bills, equipment like anything
computerish or paper or stamps or ink cartridges... but there’s much
more. If you are a writer, a lot of your life is research for writing,
and you can claim all or part of that. All the books you buy in whatever
form. ﻿﻿

'Not now, I'm working.'

Tickets to theatre, literary events,
films; petrol/mileage/capital costs of car/tyres etc to all of those
events; travel to work-related trips away from home too(performances,
festivals, signings, meetings with other
writers/publishers/agents/potential payers for your services, research
for novel/play; including hotel bills, all food and drink and cups of
tea, taxis, railfares...)

If you appear in public (signings,
readings, talks) you can claim for clothes, shoes, accessories, hair
do’s; subscriptions to charities or writing-related bodies; costs of
producing your books (editors, books you buy from publishers to sell at
your events...): all this and more can be totted up by the accountant
and the total is subtracted from your income, effectively ignored for
tax purposes.

It might save you thousands a year. You
need to be strictly honest of course and to have proof, in the form of
receipts and tickets, so start collecting them now (all of them!). Start
listing your trips and mileages, or just get them from your
calendar/diary.
That’s just a brief glimpse of the world
of business expenses, the honest kind, not duck-houses and moats and
second homes down the road from first homes, we’re not MPs!
Some of you will already be doing this, and wondering if such innocents
really exist, making voluntary presents to the Revenue. But I was one
such. And I believe many other writers are too, from what happened when
we Brits faced our tax situation in the US.
If your books sell on amazon.com, yes even a few of them, the IRS over
there will grab 30% of your earnings before that cheque with ‘Wells
Fargo’ incredibly printed on it (cowboys and sole trader pirates! How
cool are we!) plops through your door.

MY ROYALTIES FROM AMAZON.COM ARE A-COMIN', YEE HAH!

Very nice people really.

They go on doing this until you have
proved you are actually paying tax over here, and would rather give it
to UK Revenue bods, especially as it would be a lot less, because we are
actually exempt from paying tax in the US once we’ve proved who and
where we are. When I began the Byzantine process of proving this to the
IRS, we had to do it all ourselves, now Amazon are helping with some of
it, as you will know, as we had to declare our tax position in October.
Forms had to be filled in, definitions had to be learned, categories
decided.

In order to do all this you need a
special number. This number could be gained in two ways, one (ITIN) as
an ‘individual’ and one (EIN) as a ‘business’. The first one involved
not only filling in forms but actually travelling to American embassies
and all kinds of bother. The second could be done in half an hour and a
nice chat on the phone with a lovely lady at the IRS. Yet even I,
knowing I’m a sole trader, nearly chose the ‘individual’ route, so
powerful is our self image as writers. Doh! Quite a few people did it
the hard way though, and on facebook some very successful best-selling
writers were lamenting about having to do that until I broke the news
that they are in fact businesses. There’s a very helpful blog post for doing all this which may still be useful to some of you.
So it’s not all briefcases and pinstripe trousers and gold fob watches.
Being a business can be a Good Thing. And you still have plenty of time
to languish, create, write, mess about on facebook, and forget to buy
cornflakes to your heart’s content. And to go fly a kite.

5 comments:

aw! I was surprised to see this post up today but it's nice to see it again. you have to fill in form W-8BEN for every org that pays you in the US, and twice for Amazon if you use their audio books platform as well as kdp.

Nice to see this again Valerie - but also, I have a dilemma. Just about to fill in a W8BEN for D2D but they have changed these forms. There is now a W8BEN which is supposed to be for individuals and a W8BEN-E which is for 'entities.' It would not be exaggerating to say that I didn't understand ANY of the categories on the W8BEN-E - it seemed to be English but not as we know it, Spock - but could see that sole trader didn't fit into any of them. (Made me realise just what a model of clarity our Inland Revenue is!) I suspect the problem is that the US doesn't really have or even understand the category of business that is defined as 'sole trader' over here. In the UK, you can actually BE a small business/company of one, without being incorporated or forming a limited company although you have that option if you're turning over enough cash. So finding the right form for our category of business is now going to be difficult. I'm tempted to fill in the ordinary W8BEN form with my EIN number + my UK tax ID number which, over here at least, is an indication of being a self employed sole trader, and send it off to see what happens. But I have an awful feeling that at some point in the future, those of us who have EIN numbers are going to have to bite the bullet and acquire an ITIN number instead. (sigh) Anyone have experience of this? And what do you now have to do to get the ITIN number since even that process seems to change all the time?

no Catherine it's fine, the W-8BEN is pretty straightforward, it's just an ambiguity about the meaning of 'individual'. in 3), you tick 'individual' meaning that's the kind of business/'beneficial owner' you are. You then tick 9) a and b. Not c! and fill in the other bits asking for info. You can use your EIN number and your uk tax no but if you miss out any categories you will have it sent back. the good thing is you can now email it to them first, so they check it and reply, and when it's ok you can snail it off to them.